10 Questions You Should Ask when Buying or Selling Real Estate
Real estate transactions are full of assumptions. The attorney assumes that the real estate agent told you something. The agent assumes that the attorney will explain it to you. The buyer assumes the chandelier will stay. The seller assumes the buyer will get a mortgage. The burden is generally on the real estate agent to keep their client, whether buyer or seller, fully informed and educated as to what’s happening. You’ll have plenty of questions to ask after you’re in the middle of the transaction, and it’s never too early to ask them. Here are ten questions that may affect the purchase of your new home or sale of the old one that you might want to ask your real estate agent or attorney.
How important is it to have a current certificate of occupancy (CO) for the property?
A CO indicates that the city or town has approved any construction on the property, that it has been properly completed according to the building code and is safe and habitable by town or city standards. It has become an especially important issue for mortgage lenders who may turn down the loan if there is any construction on the property that doesn’t have a CO. Sellers as well as buyers should be aware of the need for an up-to-date CO.
If I change my mind and don’t want to sell my house, do I still owe a commission to the agent?
That depends. In general, if your agent brings what is referred to as a ready, willing, and able buyer who makes a full-price offer, the real estate agent is entitled to a commission even if you change your mind and decide not to sell your house. Furthermore after you’ve signed the sales contract, you may even owe the buyer something if you back out. For example, the buyer may have sold his house and put his furniture in storage in anticipation of moving. Guess who may be liable for the storage charges? When you list your house for sale, be sure you really want to sell it.
Do I get an inspection done before or after I sign the contract of sale? Does it make any difference?
Practices vary around the country. If you get the inspection done before signing the contract you can easily walk away from the deal if the inspector finds any problems with the property, but you run the risk of losing the house to another buyer while the inspection is being done. If you have an inspection contingency placed in the contract whether or not you can get out of it depends on the specific wording of the contract. Will any problem the inspector finds be enough to allow you to back out of the contract? Will there be a dollar limit for each item found that needs to be repaired, or will there be a total amount beyond which you can get out of the contract?
If I’ve made an offer on the house and the seller has accepted the offer, can they then accept a higher offer?
Practice may vary but in general the answer is yes. An offer and acceptance is really not binding until a written contract is signed by both the buyer and the seller. Although negotiations are often conducted verbally or by e-mail, real estate agents want to get the contract signed as soon as possible to lock the deal in place when negotiations are complete.
As a seller should I let the buyer’s move in before closing?
Many things can happen even up to a few hours before closing that can wreck a deal. After someone has moved into your house — and it’s still your house until the closing — you have a tenant who has certain protected rights. If the sale falls through, you would now be faced with an eviction proceeding that can be complicated, long, and expensive, depending on where you live.
Are there any deed restrictions on the property?
Deed restrictions are placed in the deed and can restrict how you use or what you do on your property. These restrictions often go beyond the local zoning laws in controlling the use of your property. For example, you might not be able to put vinyl siding on your home or use the property for a home business even though the local government laws might allow you to do those things. It’s important to know about deed restrictions early because they may affect your decision to buy the property.
In addition to regular property taxes, are there any special assessments or bonded improvements that I may have to pay for after I buy the property?
Special assessments are additional property taxes that generally go to pay for improvements like sewers or sidewalks in a particular neighborhood. These are often permanent and are usually picked up by the new owner. Alternatively, a town or city may pay for an improvement and offers you the option of paying for it in one payment or selling a bond on your behalf and allowing you to pay it off. The bond is like a loan and may become a lien on your property. Everyone may assume that you will pick up the payments on the bond, but the bank may require the lien to be paid off. Remember this was a loan to the previous owner. Find out if you’ll be expected to pay off the lien and decide if you’re willing to.
If I sign a contract to buy property and pay a monetary deposit, then something goes wrong (like the house doesn’t pass inspection or I don’t get a mortgage), how easy will it be to get my deposit back?
The deposit will most likely be held by the attorney or real estate broker representing the seller. They are under obligation to get the seller’s permission to release the funds. Be prepared for a major fight if you don’t meet the exact wording of the contract in claiming your deposit. Make sure you pay careful attention to the wording in the contract, follow all the dates, and have everything in writing.
As a buyer, should I sign a sales contract without a mortgage contingency?
A mortgage contingency allows you the time to secure the money you need to buy the house. If there is no contingency, you are required to buy the property whether you’ve received a mortgage or not. People with extremely good credit and access to sufficient funds may do this in very hot real estate markets; otherwise, it’s fairly risky.
If I have an attorney, do I need a real estate agent to sell my house?
Depending on how knowledgeable you are and how much work you want to do, you may be able to sell your house without an agent. An agent usually has a broader buyer base to show the house to; they handle negotiations; they give you tips on preparing your house for sale; and they advise you on the proper pricing of your house. They show the house to prospective buyers, follow-up with the buyers, and provide feedback to you. They also advise you regarding acceptance or not of the offers that are made. If you feel capable of doing these things yourself, you may want to give FSBO — For Sale By Owner — a try. If not, call a real estate agent.